Rhapsody Slams New Apple Subscription Rules

Music subscription service Rhapsody says that Apple's new rules for subscriptions for iPhone and iPad apps are "economically untenable" and it has teamed up with other music services to consider options, possibly including legal action.

The new rules put music services into a tough spot because unlike magazine publishers they are already paying substantial fees to record labels and music publishers.

Apple's new rules are modeled on the subscription service introduced for the News Corp magazine app, The Daily. If a user buys a subscription through the app, the app developer or publisher will have to give Apple 30% of the subscription revenue -- just like Apple takes a 30% cut from all app sales in the App Store.

Today, Rhapsody doesn't even offer in-app purchases as an option on its iPhone app -- when users want to sign up, the app opens Safari to Rhaspody's Web site, where they can go through the sign-up process. The new rules allow Rhapsody to continue doing this -- and to keep all the money from subscriptions purchased through Rhapsody.com -- but it ALSO must offer in-app subscriptions for the same price and give Apple its 30% cut.

The service now has 750,000 subscribers -- more than any other U.S. subscription music service -- and has Android and BlackBerry apps as well as bundling deals with wireless carrier Verizon and consumer electronics companies. Less than half of Rhapsody's users come through iTunes.

Users might still be able to get Rhapsody on their iPhones through the Web site, but performance won't be nearly as good as having a dedicated app. In other words, fans of all-you-can-eat subscription music services are out of luck on the iPhone -- unless Apple begins offering subscriptions through iTunes.